Have you heard of the golden rule of real estate investing? “Do unto others as you would have them do unto you.” That Bible passage is a “Golden Rule” that applies to many aspects of modern life.
There is also a golden rule of real estate investing, followed by many successful real estate investors. One of these real estate investors includes Barbara Corcoran of “Shark Tank” fame.
Residential real estate is considered one of the strongest asset classes, offering consistent and impressive returns, which is why it’s so attractive to so many people.
At the same time, not all real estate investing is the same, even just within the residential sector. To be successful, you need to ensure you’re following the “Golden Rule” by investing in the right properties and partnering with the right people, like an Austin property management company.
The Two Parts of the Golden Rule of Real Estate Investing
So, what is the Golden Rule of real estate investing? In reality, there are actually two parts to the Golden Rule.
Corcoran, who founded the New York City brokerage firm The Corcoran Group — which she sold to NRT in 2021 for $66 million — always does two things when she’s jumping into a residential property investment.
First, she always puts at least a 20% down payment on the property. Second, she has tenants live in the property and uses that rent to pay the mortgage.
By putting at least 20% down on a home at purchase, Corcoran says that you’ll always be guaranteed to at least break even on your investment. Doing so will allow you to qualify for a conventional mortgage in many cases, which allows you to avoid paying costly extra fees such as private mortgage insurance (PMI).
When you have tenants, you’ll be able to pay for your total monthly mortgage payment — which, in addition to your principal and interest can often also include your property taxes and property insurance — with the rent they owe you. This means the only money you’re investing in the home is the upfront down payment and the ongoing Austin property management expenses.
It’s even very possible that the rent you collect will cover not only your mortgage payment, but your property management expenses and still leave you with a profit.
Residential is the Preferred Sector
While commercial real estate may seem tempting, residential property investments are much preferred by many investors.
One of the main reasons for this is that residential tenants often treat the home as if it were their own. There’s a pride that they have in their home, which results in them taking care of it so they can feel as comfortable as possible and happy every time they return to it.
Not only that, but when tenants feel a connection to the property they live in, they establish a personal connection to it. This leads them to stay longer, renewing their lease year after year, which is a great thing for any real estate investor.
Commercial tenants, meanwhile, often have no such connection to the property they lease. Many times, they’ll only stay in the property until they no longer believe it’s a good fit for them, and then they’ll leave the first chance they have.
Not only that, but commercial tenants can be harder to find, as different businesses have vastly different needs in terms of the size and layout of the property, the location, the nearby amenities and much more.
Return-on-Equity (ROE) Performance in the Long Term
If you want to succeed in real estate investing, it’s important that you stay disciplined and abide by the tried-and-true principles that have made others successful. Most importantly, this means you need to buy according to real numbers and not with your emotions.
What you are looking for is a residential property investment that can bring you good returns. It might not necessarily look like your dream home, or a property that you would want to spend the rest of your life in.
However, if it presents a good opportunity to make a positive return, it’s worth considering.
Once you own a property, it’s essential to care for both the property and your tenants. This is, in fact, one of the most important real estate tips that you can follow.
You should take care of the property as if it were one that you were living in. And at the same time, you should treat your tenants as if they were your own family.
Partnering with an experienced Austin property management company like 1836 Property Management means having a dedicated team on your side. Our team will help you through all aspects of residential property investing.
We provide all of our clients with real-time performance monitoring and measurement for every property. This is done through proprietary services we provide, including REI Monitor.
As a resulted of our support, clients achieved an average 9% ROE (return-on-equity) from their residential property investments.
Get the Expert Help You Deserve in Real Estate Investing
If you follow the Golden Rule of real estate investing, you can find a lot of success and build generational wealth through one of the biggest and best asset classes in the U.S.
To succeed in residential property investment, though, you need to have the right Austin property management company on your side. At 1836 Property Management, our team of experts is well-positioned to help you be successful and achieve significant ROE year-after-year.
For more information, or to ask any questions, please contact us today.
